Selling Pressure In Growth Provides Long-Term Opportunities
When growth stocks are in favor, there’s likely no better place to be in the market. They can generate life-changing returns and outperform the market immensely when they are hot.
On the flip side, growth stocks are also susceptible to massive drawdowns during periods of market volatility like we’ve seen thus far in 2022. That’s why it’s important to understand the risks associated with growth investing, as most of these companies have sky-high valuations that are very sensitive to changes in interest rates.
It’s hard to tell just how long the current market selloff will persist, but that shouldn’t stop investors from looking at some long-term buying opportunities. While interest rate hikes might keep growth stocks out of favor for a while, if you have a long investment horizon and are looking to scoop up shares of cutting-edge companies, now could be a great opportunity to start adding them to your portfolio.
We are going to focus on a few companies that have innovative business models and solid earnings growth that could end up being a good value at current levels.
Here are 3 beaten-up growth stocks to consider for long-term buys:
1. Shopify
This beaten-up stock is perhaps one of the strongest ways to play the rise of e-commerce, which is a trend that isn’t going away anytime soon. Shopify’s cloud-based commerce platform for small and medium-sized businesses plays an integral role in the consumer economy, and the company’s growth has been nothing short of staggering over the last few years.
Shopify’s most recent quarter was a reminder of why it’s been such a big winner, as the company delivered total revenue of $1.12 billion, up 46% year-over-year, and gross merchandise volume of $41.8 billion, up 35% year-over-year.
It’s also worth noting that the company announced a record-setting Black Friday/Cyber Monday weekend last November with sales of $6.3 billion globally, up 23% year-over-year. According to MarketBeat’s consensus analyst estimates, Shopify (NYSE:SHOP) stock has an average price target of $1584.29, implying a 77.53% upside from current levels.
While it’s hard to imagine shares bouncing back to that level, Shopify’s recent selloff could still be an intriguing opportunity to own a piece of this innovative e-commerce powerhouse.
2. Coinbase Global
Owning shares of the leading cryptocurrency exchange in the world makes a lot of sense if you think that these digital currencies are here to stay. Coinbase Global (NASDAQ:COIN) allows both retail and institutional investors to gain exposure to the crypto economy in a safe and regulation-compliant way, which is certainly appealing given how volatile these financial instruments can be.
The stock has taken a beating to start the year and is down over 26% year-to-date, but if you’ve been looking to add a position in one of the most hyped-up IPOs in recent memory for a bargain, Coinbase is certainly worth a look. Investors should note that Coinbase is trading at a very reasonable 14.9 forward P/E ratio, which is quite low for growth stocks.
There’s also a lot to like about how Coinbase could diversify its revenue by catering more to institutional investors and rolling out products and services related to NFTs. It’s important to recognize that this company’s financial results are directly related to the crypto market since Coinbase generates the majority of its revenue with transaction fees, which could mean a weak quarter coming up.
With that said, shares are trading near 52-week lows and might be ready to rally if major cryptocurrencies like bitcoin can find a bottom in the coming weeks. Regardless, if you are bullish on the prospects of cryptos over the long term, it’s hard to argue against adding shares at current levels.
3. Airbnb
Finally, Airbnb (NASDAQ:ABNB) is another beaten-up growth stock to consider adding at this time, especially since pent-up travel demand should increase the company’s bookings later this year. It’s a company that disrupted the travel industry by creating a platform that connects hosts and guests online to book spaces and experiences.
It seems like investors might have quickly forgotten about Airbnb’s record-breaking Q3, as the company reported its highest revenue and net income ever and saw its Adjusted EBTIDA exceed $1 billion for the first time.
These results point towards a company that is heading in the right direction, and although new variants of COVID might impact Airbnb’s upcoming quarter, investors should still be intrigued by its long-term prospects. Shares are down about 13% year-to-date and could be on the rebound later this year, so consider adding exposure to this innovative travel company now.